BOP Stable amidst larger current account deficit

India’s BoP recorded a surplus of USD 2.1 bn during Q4FY10, more or less same as the previous quarter. Current account balance worsened a bit from the previous quarter, but was compensated by almost equal increase on the capital account.

Current account deficit stood at ~USD 13 bn during the quarter under review, amounting to ~3.4% of GDP, historically on the higher side. Among the important components of the current account, merchandise balance and private transfers deteriorated, while software earnings improved.

Capital account surplus recovered marginally to ~USD 15 bn in Q4FY10 from ~USD 14 bn in Q3. While FII and short-term trade credit have been robust, ECB has fallen sharply to near-zero in Q4. FDI trend has also been modest in recent quarters.

On full FY10 basis, BoP situation is much healthier over FY09, recording a surplus of ~USD 14 bn against deficit of USD 20 bn in FY09.
On the current account side, considerable decline in invisibles was recorded primarily on the back of lower receipts under miscellaneous services despite a pick-up in software earnings and private transfers. Trade deficit was largely stable at ~USD 118 bn. Overall, current account deficit deteriorated by ~USD 10 bn during FY10.